Over recent years, with the development of Internet related technology, electronic commerce gains rapid growth as a new business model. In the open network environment provided by Internet, browser/server applications enable buyers and sellers to perform various commercial transactions without meeting each other, realizing transactions such as online purchasing by consumers, online trading between merchants, online payments and various business activities, trading activities, financial activities and related integrated serving activities.
For electronic commerce, the development of a highly efficient and convenient trading system and trading method has attracted the attention of people in the industry.
The auction mechanism has been proven by contemporary math game theories and economics theories as a market mechanism with the highest efficiency. EBAY, the well-known American electronic commercial company, builds its whole commercial model on one-sided normal auction, while PRICELINE.COM, another well-known American electronic commercial company, builds its whole commercial model on one-sided reverse auction. Due to adoption of the auction mechanism, which is much more efficient than other market mechanisms, the two companies survive the Internet bubble and stand out from the crowd to become top electronic commercial companies.
One-sided normal auction refers to an auction where the seller takes no action with multiple buyers biding in an ascending price manner, and the seller sells to the buyer offering the highest bid within the pre-defined time frame as long as the highest bid exceeds a reserve price set by the seller. One-sided reverse auction refers to an auction manner where the buyer takes no action with multiple sellers biding in a descending price manner, and buyer buys from with the seller offering the lowest bid as long as the lowest bid is lower than the reserve price set by the buyer. While one-sided auctions have high efficiency, two-way auction or double auction is proven to be the most efficient market mechanism. The modern stock market is the best example of two-way auction. Multiple buyers simultaneously bid in an ascending price manner, and at the same time multiple sellers simultaneously offer in a descending price manner. Once a bid of a buyer equates or exceeds an offer of a seller, the buyer and the seller consummate a buy/sell transaction.
Besides higher efficiency, the two-way auction also has other advantages over the one-sided auction; there is no preset time frame. Current two-way auction, however, has a fundamental defect. It is only applicable for homogeneous single commodity. Each heterogeneous commodity needs an independent auction. No sellers or buyers can make use of information of relevant but not homogeneous commodities in their bidding to achieve the highest efficiency of the market. For example, supposing today is Monday, plane tickets for flights leaving tomorrow from Changsha to Beijing and plane tickets for flights leaving the day after tomorrow from Changsha to Beijing are auctioned in two independent auctions in current auction systems. For buyers of plane tickets who plan to leave within this week from Changsha to Beijing, there is no such exact auction for plane tickets of the week from Changsha to Beijing, so the client has to choose one auction from all auctions meeting his/her requirements manually to participate. The potential problem is that the operator has to view similar commodities satisfying his/her requirements one by one, the efficiency of the market is lowered. That is, there may be another auction among all the auctions satisfying the client's requirements that has a lower final trading price than the price the client bids, but the client does not have the chance to participate in the auction due to limited operation skill of the operator or due to time restrains. This results in other clients buying the plane ticket at a lower price. This defect is fundamental in that the final auction prices of all the independent auctions cannot be predetermined in the current auction mechanism and that current auction mechanism does not provide any way to resolve this defect.